There are two things for certain in this world, death and taxes, and cryptocurrency has yet to really experience either. It is no secret that the industry is regarded with suspicion and even distain by veterans of the more senior and traditional financial markets. Neither is it a secret that cryptocurrency has surpassed every expectation put to it since it was first created back in January of 2009. It has decentralised that which has always been solely within the purview of the powerful to change, it has allowed billions to be made by those who would otherwise be earning minimum wage, and most of all, it has seen growth at rates higher than any other financial instrument in human history. It has also allowed pump and dump schemes to defraud millions of their hard-earned dollars, made the trading of drugs, slaves and deadly weapons easier than ever before, and has allowed the creation of a new Wolf of Wall Street-esque culture in the form of scam ICO’s and Ponzi schemes in a near-lawless financial market. Not a bad rap sheet for an industry not yet old enough to buy its own beer.
For the cryptocurrency market to shed its scales of sketchiness, several things are going to have to happen. One of these are inevitable, two are not. The first and simplest is that more people, particularly well-established and institutional people, are going to have to understand the way cryptocurrencies work. To most of them, all they need to understand is how to “buy a bitcoin” and they’re a crypto wizard. Anyone who understands even the smallest amount of traditional equities markets knows it takes more than buying a share in Google to make yourself a financial expert. For the industry to mature and be treated seriously, it must be understood.
The second is that it has to slow down and stabilise. This is the only inevitable one. Currently it is not abnormal to see ICO’s that more than triple on value the day after they are released. This is unsustainable and to be frank, ridiculous from the perspective of a traditional investor. Traditional investors would consider returns of 20% per year absolutely astounding, and the idea of more than doubling your money every month is either impossible or criminal to them. Bernie Madoff, famous hedge fund manager and criminal, managed to achieve the likes of 40% per annum for some of his investors till he was imprisoned for running his fund like a Ponzi scheme.
Returns of the likes we are currently seeing scream of criminality to the traditional investor. Furthermore, even with the instability we see, the returns we are seeing make every other investment on the planet abysmal by comparison. If the average institutional investor does end up understanding cryptocurrencies before this slowdown occurs, a massive shift of wealth from equities to cryptocurrency will occur as investors seek to take advantage of these insane returns. Should this happen, it’s possible cryptocurrency will be able to add responsible for a financial crisis to its rap sheet. Therefore, short of the fall of global capitalism, the industry is destined to slow down and stabilise to be more in line with traditional markets.
The third and in my view, hardest to achieve, is that we in the industry must accept that this slowdown will happen culturally. Currently the culture around cryptocurrency can at best be described as libertarian and at worst as deliberately criminal and anarchistic. A lucky 22-year-old can become a millionaire in almost any financial market, but in cryptocurrencies that happens every week. This is not normal. We are not special, and we must accept that. We are a financial market like any other, and crashes have happened in every market from shares to wood to oil to property to bonds. We need to drop the free-spirited culture of financial anarchy and realise we are an industry dealing in in the billions. If we want to be taken seriously, we must first take ourselves seriously.